BLOG: Five P2P myths busted

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Stuart Law of Assetz Capital takes down five common myths about peer-to-peer lending.
BLOG: Five P2P myths busted

You can include P2P loans in your NISA allowance.

Investors could be forgiven for thinking that this is the case – after all, George Osborne announced the change in March – but the actual technical work to make this happen takes time. P2P industry representatives are speaking to the Treasury, and we hope to have a solution in place by the end of the financial year.

Now that the industry is regulated by the FCA, it’s risk-free.

FCA regulation ought to make the P2P lending industry safer for ordinary investors, but as with any financial product, risk is involved investors should take sensible precautions and research products.

P2P lending is for tech-savvy whiz kids.

We have many lenders on our platform who are retired, for example. Depending on the platform you use, P2P lending is very simple, and good platforms will have telephone support available if you do need a little help getting set up.

Defaults are the same as losses.

This is one of the most common misconceptions that we see. An increasing number of P2P lenders (ourselves included) take security on every loan, which means that when a loan defaults, we aim to use that security to get our lenders’ money back. When choosing a platform, investors should also look at loss rates, as good platforms that take security should expect to recover the majority of defaulted loans – our expected loss rate for the £43m of loans we’ve issued to date is just 0.12 per cent.

If you lend money via P2P platforms, that money is locked in for a fixed period

Although some P2P products do ask you to commit funds for a fixed period (this is made explicitly clear), the majority of P2P platforms allow investors to sell on their loan parts as long as the loan is in good standing. Some platforms charge a fee for this; we don’t – this means that, as long as there are other investors willing to buy your loan parts, you can withdraw your money whenever you want, without penalty.

To learn more about P2P lending click here.

Stuart Law is CEO at Assetz Capital.

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